EmailYesterday's rally was a solid, fairly broad-based bounce that has stopped the hemorrhaging.
The tone of mild desperation may give way to one of increased patience with greater hopes. May. Many financials did not participate in the rally. There were some specific reasons. JP Morgan has continuing problems with its trading losses. Morgan Stanley is being excoriated for its handling of the Facebook IPO. Even taking these into account, the enthusiasm for financial stocks yesterday was not as strong as for the broader market. This reflects persistent underlying concerns about potential losses due to the European credit crisis. The financial sector stocks need to show greater strength before the S&P 500 index can rally back to the levels of April.
Stocks still have excellent long-term value, and yesterday's rebound was welcome. The market is, by many measures, oversold and could improve further near term. But the underlying anxiety over the outlook for Europe has only been temporarily mitigated and could flare up quickly again. The summer doldrums aren't over - and it isn't even summer yet.
European stock exchanges are up over 1%. That is partly a reaction to the late US rally yesterday. It is getting harder to tell which is the tail and which is the dog. The euro is down slightly. There is another meeting of European leaders starting tomorrow.
Japan, the beneficiary of multiple massive stimulus programs in recent years such as Europe may now attempt, had their government bonds downgraded by Fitch.
Best Buy is lower and Medtronic slightly higher after earnings reports. Facebook is trading down another 1% pre-market, while Apple is up almost 1%. May existing home sales data will be out at 10:00 ET.
Futures suggest a modest up open. An impressive aspect of yesterday's rally was the absence of any late selling. It would greatly improve sentiment if the market were to not succumb to a late selloff today.
Founder and Chairman, Briefing.com
